Why UnitedHealth Stock Was Climbing on Wednesday

Key Points

• The insurer maintained its dividend policy.

• This was obviously a relief to worried investors.

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UnitedHealth (NYSE: UNH) stock was proving to be beneficial for investors' financial health on Hump Day. They were trading the big health insurance company's stock up by nearly 4% in late-session action, in no small part because of a fresh dividend declaration. That performance marked it as an outlier, as the S&P 500 index had only ticked up by 0.2% at that stage.

Quarterly payout incoming

Before market open, UnitedHealth's board of directors authorized the payment of a quarterly dividend of $2.21 per each of the company's common shares. This is to be dispensed on Sept. 23 to investors of record as of Sept. 15.

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Despite some challenges to its business recently, UnitedHealth has held steadfastly to its dividend policy. It switched from an annual to a quarterly disbursement in 2010, and has raised it on a regular basis since then. Over that stretch of time, it has risen strongly from $0.03 to the present level.

Although Wednesday's dividend declaration was in character for UnitedHealth, the investor reaction might have been something of a relief rally.

Earlier this year the company absorbed a big group of Medicare Advantage patients and to its surprise, those folks made more visits to doctors and other healthcare professionals than anticipated. This impacted fundamentals, and some investors were surely worried the dividend would be suspended.

The high profile of a high yield

Although it's unwise to buy a stock purely to clock the dividend, UnitedHealth's payout is notable for being generous. Unlike other dividend-paying healthcare stocks, this one has quite a high yield -- nearly 3.3%, against the 1.2% average of all S&P 500 index component stocks. It's little wonder investors were happy the company is maintaining its payout.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.